Supply crunch pushes UK power Day-ahead to new highs

14 September 2016 14:20 Source:ICIS

Volatility continued to affect the UK prompt wholesale electricity market on Wednesday morning, with Day-ahead Baseload trading close to an all-time record of £160.00/MWh, three-and-a-half times higher than the average ICIS closing assessment of the product so far this year.

Most of the premium on Thursday’s delivery was evident in blocks 5 and 6 products, which cover the last eight hours of the day. The former was trading at £270.00/MWh while the latter, covering 20:00 to 00:00, hit a peak of £400.00/MWh in morning trade.

Peak demand late on Thursday afternoon was forecast to exceed the sum of physical generation as notified to National Grid on a day-ahead basis by 4GW, according to National Grid data published on Elexon’s BM reports at 12:30 London time.

The UK day-ahead auction ran by N2EX recorded a power price for hour 19:00-20:00 of £999.00/MWh, with 20:00-21:00 £200.00/MWh cheaper. And this came after the exchange was forced to open a second auction, which is triggered if a price above £500.00/MWh is recorded in a given hour.

Wednesday’s volatility continues this week’s spike on UK prompt products, which have responded bullishly to an unexpected late-summer boost in air-conditioning demand, low wind generation and plant outages.

Several large coal-fired and combined-cycle gas turbine power plants are on the final stretch of summer maintenance, or began planned outages earlier in the month that will last until the end of September or early October.

Unplanned outages have also hit one of Drax’s 645MW coal-fired units and EDF’s 620MW Hartlepool unit one in recent days to compound the system shortness.

Uncertainty over the availability of the 2GW IFA interconnector with France is also stirring anxiety in the market, according to one source.

Imports through the cable into the UK were running at 1.5GW late on Wednesday morning following an unexpected failure reported on Tuesday afternoon. Full capacity is expected to be restored late on Thursday evening, according to remit data.

Low-cost wind generation is forecast to dip below 1GW for most of Thursday, with more expensive coal or gas-fired plants set to ramp up to meet demand.

There was little upside on the country’s NBP Day-ahead contract in morning trade, with ICIS’ 11:00 assessment keeping it near seven-year lows. As a result, gas-fired generators stand to make hefty returns on Thursday.

The bullishness affecting day-ahead trading filtered through to the week-ahead market as well. The baseload product began trading at £50.00/MWh, 9% above ICIS’ closing assessment on Monday, before rising a further 8% to 54.00/MWh shortly before 11:00. henry.evans@icis.com



By Henry Evans